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Exciting Health Insurance Innovations in the Pipeline

In Dec 2014, Insurance Regulatory and Development Authority of India (IRDAI) had set up an Expert Committee on Health Insurance to review, revamp and revitalize the overall health insurance business in India.

The report, recently submitted by the Committee, contains quite a few interesting suggestions and recommendations.

1. Wellness and Preventive healthcare incentives (discounts in premium)
One of the key proposals is to allow the health insurers to offer discount in the premium to the policy buyers who follow Wellness and Preventive Healthcare practices. 

This is a win-win situation for both. People would benefit as they will generally remain healthier and also save on the insurance premium. Insurers would also benefit as this would bring about a reduction in the overall claim amounts payable.

2. Enabling environment for Health Savings Products
The present Indemnity or Benefit Health Insurance plans do not cover all medical expenses. OPD, Dental Treatment, Maternity are some such costs that have to be borne by the people themselves even if they have adequate health insurance cover. 

The Committee, therefore, recommends that health insurers may also offer Health Savings products that allow people to create a "health" fund to meet such uninsured health expenses. To encourage people to opt for such plans, suitable tax breaks could be built-in. But, to avoid exposure to market volatility, Health Savings products need not be unit-linked.

3. Pilot [Innovative] products
To encourage new and innovative products without seriously jeopardizing the business of health insurers, close-ended pilot products may be permitted. Such Pilot Products may run for 5 years and cover risks that are otherwise presently declined or excluded. Unlike regular health plans, these would have limited guaranteed renewability and annually reviewable premium rates.

Based on the experience, such special health insurance covers could either be discontinued or converted into a regular product (when they would become subject to the various provisions of renewability and premiums as per the current Regulations).

4. Entry-age based pricing
The Committee observed that health insurance plans are more popular among the older people vis-a-vis the younger ones. Naturally so because the need for such plans is more as people grow old and the chances of falling sick increase. They derive comfort from the fact that, even if these policies are bought at a late age, they come with implied renewability.

Therefore, an entry-age based premium pricing strategy should be considered. Thus, for a given age, new policy buyer should be charged more premium than a person renewing his policy. This would not only broaden the market for health insurance by attracting younger population but also increase the persistency levels.

5. Annual inflation-linked premium revisions
Given the year-on-year increase in the costs of medical treatments, health insurers may be permitted to automatically increase the premium every year based on a certain inflation benchmark (e.g. CPI+3%) as the cap. Any increase over and above this would, of course, be subject to IRDAI's approval. This would enable insurers manage a sustainable business; and hence be able to offer many new and efficient products.

Needless to mention, health insurance cover is a MUST for everyone. Many families have been financially destroyed by the gigantic burden of the skyrocketing costs involved in medical treatments. Moreover, health insurance is eligible for tax benefits too.

You are making a BIG MISTAKE if you are not adequately protected and covered against the risk of health problems.

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